Lawn Master manufactures riding lawn mowers that it sells to the large discount stores such as Wal-Mart, Lowes, and Home Depot. The mowers are marketed as a "value" product, with good quality at a very good price. The company's two products are the Quality mower, which in 2009 sold for $1,000 (the discounters retailed it for $1,500), and the Heavy Duty model which Lawn Master sold for $1,500 (and was retailed for $2,200). At the end of 2009, the company has come under increased price competition from other manufacturers. The company believes it must reduce its price in 2010 on both products to keep its current market share with sales of 3,300 units. The unit variable costs for the Quality product are $800 and $950 for the Heavy Duty product. Management does not believe it can reduce these variable costs for the coming year but will begin to study ways to do so for 2011. In the meantime, the company management believes it can maintain its total market share by increasing its advertising expenses by $150,000 and cutting the price on both models by 10 percent. Fixed costs were $550,000 in 2009 and are not expected to change in 2010, with the exception of the increase in advertising. In 2009 the sales mix was one-third for Quality and two-thirds for Heavy Duty, respectively.

In 2010, the sales mix was 40 percent for Quality and 60 percent for Heavy Duty, respectively.

Required

1. Calculate a comparative contribution income statement for Lawn Master for 2010 that shows the volume and selling price variances for each product based on contribution margin.

2. Determine the sales mix variance and the sales quantity variance for each product, based on contribution margin.

3. Did the price change and increase in advertising have the expected results? Why or why not?

4. What methods should Lawn Master adopt to become more competitive in 2010 and 2011?